It’s long been a source of amusement to me, as I amble around the platforms sector, how few of the senior folk I meet have money on their own propositions. Indeed, relatively few even have a financial adviser; most of them probably don’t have a financial plan either.
Dentists have bad teeth, I suppose.
Anyway, the lack of first-hand experience of the proposition you are working on or selling leads to all kinds of undesirable outcomes. I well remember a Glasgow IFA showing me a suitcase full (a small suitcase, but still) of contract notes and other rubbish that had been spewed out on one wrap proposition I used to work on.
So where do all these platforms bigwigs hold their money, if not on the fine kit they punt? The answer, overwhelmingly, is Hargreaves Lansdown or Alliance Trust Savings (ATS). This is based on a non-scientific survey, but I bet all the money in Peter Hargreaves’ pockets that it’s true.
It is not entirely surprising, then, that the industry has been staring intently at developments in the direct platforms market as providers therein start to unbundle their offerings and come clean on their price.
For the purposes of this column we are not interested in who is cheapest (generally iWeb) or most expensive, but instead in whether there are any emerging trends in the direct space which might map across to the advised sector.
And yes, there are. Which is a relief, because this would be a short column otherwise. We’ll do them in a minute, but it is worth mentioning that the advised platform sector really could do with a shot of something. Bar ATS, there has been little movement on the fixed-fee front, and the pricing announcements we have seen in the past six months or so are mainly just nips and tucks. All very dull.
So what is there to be excited about in the direct landscape?
A properly competitive market is developing around this shape, which suits those with larger funds - such is the nature of arithmetic. Some providers go for wrapper fees; others try to minimise those and concentrate on dealing fees; others go for a hybrid. We are talking mainly about Isas and General Investment Accounts (GIAs) here; Sipps generally all attract additional wrapper charges (apart from Bestinvest, whose Sipp is weirdly cheaper than its Isa). The bleeding edge is represented by iWeb, whose system is certainly unsophisticated and clunky, but at £5 a trade and no other day-to-day charges who cares? Hold a 10-fund portfolio, switch five of those funds in a year (so 10 trades) and you pay just £50 for your Isa with a £25 set-up cost in year one. With, for example, £75,000 in your pot, that’s a princely seven basis points.
Others may moan about sustainability, but iWeb is part of Halifax and is designed, I would suggest, to gauge demand for ultra-skinny, low-cost services. A look at this Table and it will be immediately clear that fixed fee is the way to go for the more affluent investor, unless you are a total trade hound. Why haven’t more advisers gone fixed fee in their platform choice? Because there is not a market yet. Your choice is ATS or ATS, and while the Dundonians are a fine outfit, they don’t suit everyone. So there is lots of room for advised platforms to get creative, spot the trend coming over from the direct side, and suit up.